As governments worldwide grapple with whether and how to regulate cryptocurrencies, publicly traded exchange Coinbase is looking to guide policymakers in developing regulations that protect consumers but are beneficial to institutions and crypto-natives alike.
“What we’re trying to do is find a path that allows for crypto innovation to continue driving,” Coinbase Head of US Policy Kara Calvert told Decrypt. “We want to make sure that DeFi (decentralized finance) is not killed in its infancy.”
Since public awareness around Bitcoin, DeFi, and cryptocurrencies took off during the 2016-2017 bull market, regulators have had to play catch up and attempted to apply decades-old laws to new technology. Many in the space have chafed at government regulation and see know your customer (KYC) policies as an invasion of privacy that creates honeypots for cybercriminals.
Calvert said the key to easing these concerns is cooperation.
“I think what we need to do is we need to create rules of the road,” she said. “One thing the industry as a whole could do a better job of is getting input from ‘degens’ and DeFi projects to make sure policies work for them and don’t put them in a box or create barriers.”
Unpopular Opinion: KYC is an ineffective means to catch money laundering and crime, and creates a moral hazard of all the data of innocent people caught in the dragnet. That data will be stolen and used against innocent people. The paradigm creates more crime than it stops.
— Bob McElrath (@BobMcElrath) October 24, 2019
Launched in 2012, Coinbase, the largest U.S.-based cryptocurrency exchange, went public in 2021. Since then, the company has been under tighter regulatory scrutiny.
Calvert says Coinbase welcomes regulation but that “we just want to make the regulation better.” One area of regulation that remains a point of contention for crypto-natives and privacy advocates is KYC policy.
See the correct analysis of this news is that AML/CTF and KYC don’t work. They will never work because they try to control the *tool* not the *criminal act*. It’s not the money that is illicit, it’s the use of that money to commit crimes.
— Andreas (@aantonop) September 21, 2020
KYC and Anti-Money Laundering (AML) are financial industry practices that ensure that a client’s identity can be verified and thus used to help prevent or prosecute financial crimes.
For example, American banks and regulatory agencies like the Securities and Exchange Commission (SEC) require customers to provide detailed financial and personal information before opening an investment or banking account — something crypto and DeFi firms traditionally don’t do.
“There are some folks that will not want to be compliant with KYC, and they’ll go somewhere else,” Calvert said. “I think it speaks to actually wanting to make it safe for the United States to utilize crypto, and because of that, there are rules that will go along with that.”